In this year’s summer series on PA Future, we have asked junior members of ESG/sustainability teams to answer our questions on career paths, red flags and personal passions, to showcase the ‘Next Generation‘ of talent coming through.
Candidates needed to be a member of a fund management, ESG/sustainability or stewardship/engagement team with less than five years’ experience.
Here, Guilherme Pampolin, investment research associate at Square Mile Investment Consulting & Research, discusses why his career aspirations changed course, how the industry can reduce the potential for future backlash and discrepancies in the use of the term ‘engagement‘.
How did you start your career and what led you to focus on ESG/sustainability? Is this a personal passion?
I’ve always had a deep interest in the big issues that affect our society. Growing up in Brazil, there was a particular sense of urgency around addressing both social inequalities in a developing country, as well as environmental threats – perhaps most significantly relating to preserving biodiversity, protecting indigenous communities and mitigating climate change in the Amazon.
I initially wanted to be a politician as a means of influencing change on a social and environmental scale. However, while studying, I realised that a powerful way of driving change might actually be through participation in the investment sector – in other words, directing the significant capital and innovation generated by businesses towards being the driving force for changes needed to address global challenges. The rest is history, as they say!
You joined the industry around five years ago, when appetite and launches in this area of investment soared. What was that like to experience as a relatively new starter to the industry?
It was fascinating to see asset managers shifting their focus to ESG-related themes given growing investor interest in ‘doing good’ with their money. Europe has been at the forefront of this revolution, innovating through the introduction of new regulations and incentives to invest sustainably. As with every new trend, there remain some improvements to be made – specifically, addressing the challenges faced around suitability and client duty, as well as making industry jargon more accessible to all. However, it’s exciting to see the progress that has been made so far.
And what has it been like for you over the past few years where appetite has waned, and we have experienced the anti-ESG backlash in some areas?
The underperformance experienced in the last few years has been linked primarily to macroeconomic conditions, brought on largely by the recent interest rates cycle – and it’s crucial to bear in mind that present conditions will pass.
New regulations focused on transparency, in conjunction with decreasing inflation, expected interest rate cuts, and stronger pan-industry initiatives will take the market through a consolidation stage that is likely to favour ESG in the long-term, irrespective of political intentions.
That having been said, investment products should be like items you find on the supermarket shelves: diverse, clearly ‘labelled’, (pardon the pun!) and tailored to different needs and customers. One size doesn’t fit all, so going forward, we need to collaborate to make sure investors fully understand the risks, as well as benefits, of various investment approaches. In doing so, we reduce the potential for future backlash.
What has been a career highlight for you?
Definitely playing a key role in the recent update of Square Mile’s proprietary 3D Framework – which has received incredibly positive feedback from asset managers to date.
By incorporating granular analysis of company revenues and enhancing datasets through qualitative assessments, 3D enables us to dig forensically into funds’ sustainability credentials and understand true alignment with sustainable objectives. By measuring responsible investment claims and monitoring controversial activity exposure, I feel I am contributing towards investors making more informed decisions.
Additionally, through extensive research into investment funds’ processes and capabilities, coupled with in-depth discussions with fund managers and sustainability teams, I have gained valuable insights into the industry’s current landscape, enabling me to contribute to greater transparency within the sector. I have personally witnessed the positive impact of these efforts, with companies implementing improvements and developing innovative solutions to address pressing social and environmental challenges. These tangible outcomes speak once again to the potential for investment industry to be a driving force for positive change.
What is a red flag you in terms of greenwashing? Are you happy to hold companies or individuals accountable for greenwashing?
A major red flag is the discrepancy in the use of the term ‘engagements’, with some funds defining this as a general conversation on the theme of ESG, while others require engagements to delve into much greater detail. I think the latter type of engagement – where funds set a goal, track progress and present outcomes – is vital for promoting true sustainability and holding funds to account on responsible objectives. It remains crucial to remember that funds should be cautious when considering any causality link between engagement and improved outcomes.
Fast forward to five years from now – where would you like to be in terms of career aspirations? And how do you think the industry will have evolved by then?
I am working to become a louder voice in the responsible investment space, by contributing to discussions, sharing knowledge and experiences, offering innovative ideas and supporting clients through ‘out of the box thinking’. In my opinion, sustainability will continue to be central to investing over the coming years; particularly for analysing assets, forecasting returns, and understanding innovation. Eventually, I believe that all investment should, and will, be focused on sustainability – and I am excited to be a part of it.
